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In this economy, it goes without saying that companies are looking to cut costs
wherever they can. Fulfillment operations are often the first place targeted
for cost cutting. But cutting fulfillment costs is not as easy as it seemed it
would be. However, that doesnt mean that 17 different Excel spreadsheets and
35 hours of team meetings are in order.
Instead, focus on first things first, keeping things simple if at all possible.
Sometimes whats wrong with the machine is that its unplugged.
Reduce Shipping Costs
Reducing shipping costs is a no-brainer way to reduce the overall cost of fulfillment.
Again, though, as simple as it seems, that doesnt mean its easy. When working
with an outsourced fulfillment center, for example, reducing shipping costs
may entail some renegotiation of longstanding contracts. While this may be
uncomfortable, it may also be worth it. Partners are valuable, but business
is business.
Saving five percent on shipping can add up quickly.
Smaller fulfillment centers simply may not do enough volume to attain the
highest discount rates from mammoth companies like UPS and FedEx. In that case,
it may be time to think about working with a larger fulfillment center that
can get those bigger discounts.
If the smaller fulfillment company can do the job for less by some other means,
such as combining shipments more effectively, then thats great.
But the point is, the job needs to be done for less--and can be.
Sell More Stuff
Similar to the above example, where bigger fulfillment centers get bigger discounts,
one of the best methods of cutting costs on fulfillment is to get bigger.
That is, sell more stuff.
However, its important to know the fulfillment cost for each product ahead
of time. Obviously the price-per-product fulfillment cost varies according
to destination, but metrics can be developed that make these figures real.
By thinking of the fulfillment cost as part of the product, better pricing
decisions can be made. Know that number, even if its not 100 percent accurate.
Now consider evaluating competitor prices and beating them. Studies show that
a price beat of five percent can result in up to ten times the sales volume
versus higher-priced competitors.
With numbers like those, it may be possible to grow out of the economic slowdown.
But that conversation doesnt even begin until a per-product fulfillment cost
is assigned.
Shop Around
Mama said it, and its true. Shopping around is a must.
Especially if products can be bunched into large containers and shipped as
one package, shopping around for the best rates can result in significant cost
savings on each deal.
Of course, shopping around can go wrong if price is the only consideration.
Dont forget that fulfillment centers have to make payroll, too, so any deal
that sounds too good to be true probably is.
Sources
MultiChannel Merchant
Magazine
OptimaLogica.com